IMF-­FSB gives crypto recommendation to G20

IMF-­FSB gives crypto recommendation to G20

Subject: Economy

Section: External Sector

In News: Joint paper by IMF and FSSB suggests comprehensive regulation, supervisory oversight than a blanket ban.

Key Points:

• A joint synthesis paper prepared by International Monetary Fund (IMF) and Financial Stability Board (FSB) has advocated for comprehensive regulatory and supervisory oversight of crypto-assets, as opposed to a blanket ban to address macroeconomic and financial stability risks.
• It also pitched for using norms for money laundering to check the use of crypto assets for criminal and terrorist misuse.
• This paper has been prepared on the request from India’s Presidency and combined IMF’s note and FSB’s high level recommendations.
• Gist of the paper:
  • The paper highlights that a blanket ban making all crypto activity (for instance, trading and mining) illegal can be costly and technically demanding to enforce.
  • It would also tend to increase the incentive for circumvention taking advantage of the inherent borderless nature of cryptoassets, potentially heightening financial integrity risks

Regulation and supervision:

• • Regulation of licensed or registered cryptoasset issuers and service providers can support the functioning of various policy measures.
  • In addition capital flow measures, fiscal and tax policies, and financial integrity requirements can be better managed.
  • For example, licensed, regulated and supervised cryptoasset service providers along with appropriate reporting requirements can reduce data gaps, which are particularly important for capital flow measures that rely on monitoring of crossborder transactions and capital flows.

Risks from free adoption of cryptos?

• • The paper noted that wide- spread adoption of cryptoassets could undermine the effectiveness of monetary policy,
  • circumvent capital flow management measures, exacerbate fiscal risks, divert resources available for financing the real economy, and threaten global financial stability.
  • These risks could reinforce each other, as financial instability can make maintaining price stability more difficult and vice versa; cause destabilising financial flows; and strain fiscal re- sources, the paper said.

Addressing criminal and terrorism financing:

• •  Jurisdictions should implement the financial action task force (fatf) anti- money laundering and counterterrorist financing (aml/cft) standards that apply to virtual assets (vas) and virtual asset service providers (vasps).
  • Jurisdictions should identify and assess the money laundering and terrorist financing (ml/tf) risks associated with vas and take steps to manage and mitigate those risks.